How Life Insurance Premiums are Determined

Learn How Life Insurance Premiums are Determined

What is a Premium for Life Insurance?

The premium is the amount of money you pay to the insurance
company on a regular basis, usually every month or once per year, in return for
the insurer providing you with a specific amount of life insurance protection.

The premium charged is based on several factors the insurer
considers in determining how much you pay based on the risk presented by
insuring you.

Life Insurance premiums are about life insurers managing
risk. Insurers manage risk and avoid it by setting rates that will allow them
to profit from the premiums you pay for your life insurance policy.

The insurer analyzes the risk of you dying by reviewing your
responses to the questions on the application and results of your physical examination.

Their goal is to take care in choosing who they insure, so
their insured lives longer and pays more premiums.

What Type of Risk are Life Insurance Companies Interested In?

Basically, the same risks
we are all concerned about with our
health and longevity.

Subjects we hear discussed each day on the news and in the
newspapers and magazine articles:

High cholesterol,
chewing tobacco, diabetes, being overweight, cancer, smoking, HIV and other
illnesses and diseases related to poor health and causing early death.

In considering these health risks, the insurance company
selects a grade or status relating to your health.

Health ratings
are based on your gender, age and health.
These ratings also determine the rate or premium you will pay for your life
insurance coverage.

Obviously, the better
health you are in, the lower your rate would be compared to the person (of the
same age) in average or poor health. That’s because you have a lower chance of
dying prematurely compared to someone with health issues.

Several life insurance risk
factors considered in determining your insurance premiums are not in your control.

Your age also has
an effect on how much you pay for life insurance. The older you are the more
likely you are to die, so you pay more for a new life insurance policy at an
older age, than a younger person.

Your lifestyle
(risky hobbies or frequent travel to high risk areas with disease or war), your
family medical history, and your physical health are key factors in determining
your life insurance premium. The greater the risk for each of these factors,
the higher your premium for life insurance.

Usually, the insurance company will ask about your health
and require you to take a medical exam.

Blood and urine are checked for disease, including HIV,
hepatitis, high cholesterol, cancer, kidney problems, diabetes, and other
health problems. Also, screening for nicotine, medications and illegal drugs
are performed.

Each life insurance carrier sets its own life insurance
rates and decides what individuals fit into the preferred, super-preferred and
standard risk classes for rating purposes.

If you have a health
problem you can address it: Stop smoking. Take medication or lose weight.
Start eating better. You can improve your health and lower your life insurance
premiums.

If you give evidence of considerably improved health to your
life insurance company, they may decrease your life insurance premiums. Keep
this in mind.

Some life insurance companies will change your risk rating and lower your premiums if your risk
factors get better over time. It pays to improve your health. You live longer
and you pay less for your life insurance.

Compare Life Insurance Premiums

Top Pick – JRC Insurance
Group

JRC Insurance Group helps you shop, compare and save on life
insurance. Regardless of your age or health background, we'll shop our 40+
insurance companies and find you affordable life insurance you need to protect
your family and fit your budget. Compare the best life insurance rates
for savings up to 73%. Get Your FREE Quote.